An employee may claim that his or her employment is constructively dismissed when his or her employer makes a unilateral change to a fundamental term or condition of employment, without appropriate notice. What about a change in the employer, with no other change? Surely that can’t be a constructive dismissal. Apparently so, at least in Quebec, where the Superior Court ruled that the employer’s identity and reputation were, in the particular circumstances of the case, essential conditions of the contract of employment. According to the court in Boulad v. 21008805 Ontario Inc. (PDF - available in French only), the change in the employer, solely by reason of a sale of the employer’s assets, resulted in constructive dismissal.

This case arose when the employee’s employer sold its assets. In provinces other than Quebec, the purchaser would have had to make an actual offer of employment to the vendor’s employees (although recognizing prior years of service with the vendor for certain purposes). But the law is different in Quebec. In Quebec, under article 2097 of the Civil Code of Québec, a contract of employment is not terminated by the sale of the company. Instead, the purchaser is bound by the vendor’s contract of employment with the employee, as is the employee. This case arose when the employee did not want to continue working for the purchaser.

The Facts

In the spring of 2009, a small company, Jesta Group, which owned two hotels in the south of France, acquired a hotel of a major hotel chain doing business under the name Westmount Hospitality Group near the Montreal airport. In accordance with the Civil Code, the employees would continue their jobs with the purchaser, on the same terms and conditions.

Before the deal was closed, the hotel manager informed Westmount's vice-president of operations that he did not want to continue his career with the purchaser. He asked to be transferred to another hotel in the Westmount chain or to be provided with severance. Why? The hotel manager had 22 years of service in the hotel industry and had always worked for well-known establishments. He claimed that the purchaser lacked experience and was unknown in the hotel industry.

The sale was closed and provided for continuity of employment for all employees. The hotel manager, still waiting for an offer from Westmount, did not show up for work. Westmount no longer considered the hotel manager its employee and told him that his job had been transferred to the purchaser by the sale of the hotel.

The Decision

According to the Quebec Superior Court, in the circumstances of the case, the change in the identity of the employer constituted a substantial change to an essential condition of the employee's contract of employment:

  • The hotel manager aspired to a certain career.
  • The hotel manager perceived the transfer of his job to the purchaser as an obstacle or a step backward in his career path.

The Court recognized the principle that minor changes in work conditions and responsibilities resulting from the sale of a business cannot be considered a constructive dismissal. However, for an employee concerned about the advancement of his career, the employer's identity and reputation can be crucial. In that case, they may be regarded as essential conditions of the contract of employment.

With respect to article 2097 of the Civil Code of Québec, the Court said that it cannot have the effect of [TRANSLATION] "chaining the manager to the successor of the former employer without regard for compliance with the essential conditions" of the contract of employment. 

Considering the hotel manager's 22 years of service, the Court awarded him 24 months’ pay in lieu of notice. Further, the hotel manager did not have to work with the purchaser in order to mitigate his damages.

A Cautionary Note

We understand that the employer is appealing this decision. In the meantime, however, this case reminds us that an employer's identity and reputation, less tangible aspects than other factors like salary, may in some circumstances be regarded as conditions that are at the very essence of a contract of employment. When an employer in Quebec considers selling its business, it must now bear in mind that the transfer of certain employees to the purchaser may not be automatic. In the rest of the country, we may see employees relying on this case in a share sale - when they do not like the new owner of their employer’s shares. Depending on the circumstances, some employees may be able to refuse to work with the new employer, and instead be entitled to significant severance.